Is it time to get on the first elusive rung of that property ladder? If you are a first time buyer and have never had a mortgage before, it can be a little daunting. Here is our guide on mortgages for first time buyers and what you need to know to move past the first step with ease.
Know What a Mortgage Is First
A mortgage is a long-term loan taken out over a number of years to buy a home. The term, loan amount and monthly repayments will all depend on the price of the property; your age and financial status will also be taken into consideration. A mortgage typically runs for 15+ years and you will pay back a monthly amount until your last payment when you will then own your home. The time frame might seem long but compared to paying your Landlord rent for 15+ years, it is well worth it when you reach your goal and become a homeowner in your own right.
Familiarise Yourself with Different Types of Mortgages
There are many different types of mortgage that will depend heavily on your circumstances, we have listed the most commons ones here below. It is important to get more in-depth and personal advice on which is the best option for you. (If you need advice, feel free to get in touch)
First Time Buyer
There are often a lot of deals out there with different lenders, lower rates and discounts on offer to help first time buyers from different lenders so it is wise to shop around to see what would suit you the most. Some might offer discounted deposits or even a portion of your deposit back as a cash lump sum on completion.
Variable Rate
A variable rate mortgage is a little more complicated and doesn’t suit everyone. The monthly mortgage payment will vary from month to month as interest rates go up or down. The main base rate of the mortgage will remain the same but your actual payment will differ and move on par with the overall market interest rates.
Fixed Rate
A fixed rate mortgage is the opposite of the variable mortgage and is a popular choice as your payments every month will remain fixed at a pre-agreed amount for a set amount of time. This can be re-reviewed at the 3 or 5 year mark for example.
Know Your Figures
An interest rate is the amount of money you pay your lender each month for lending you the money for your mortgage and counts as their profit. As we mentioned, interest rates can be fixed or fluctuate depending on the market. Each lender will have their own rates and benefits.
A deposit is how much money you put toward the purchase of your new home and counts towards the overall payment. The amount you provide can also lower your monthly mortgage payments. Again, different lenders will request different deposit amounts and the amount you pay will depend on the price of the property you want to buy. As a general rule, the more deposit you have, the lower your interest rates will be too.
Talking to a dedicated mortgage advisor is the best next step toward owning your own home.
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We hope you have found our first time buyer guide useful but if you would like some more help and guidance on buying your first home, we are here to help.
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